New York Bank Superintendent: MERS Regulations Possible

Richard Neiman believes regulators may step in and provide guidance to mortgage servicers on their use of the Mortgage Electronic Registration Systems.

Neiman, the superintendent of banks at the New York State Banking Department, made the remark in response to a question following his speech Tuesday at the SourceMedia Mortgage Servicing Conference ongoing this week in Dallas.

"The issues that have been raised are real and will require guidance in light of diverse judicial opinions," Neiman said.

In New York State alone, two judges have issued seemingly conflicting rulings about the role of MERS in the Empire State. In February, a federal bankruptcy judge ruling in a New York case judged that the agreement between MERS and its members do not meet the state's strict agency laws, requiring servicers wishing to foreclose to prove legal standing in his court.

One month later, a county judge in Bronx, NY ruled that Bank of New York Mellon sufficiently proved its standing as rightful owner of both the mortgage and promissory note, despite the use of the MERS System to track ownership changes of the promissory note.

Neiman declined to specify what guidance regulators might give on the use of MERS, adding that the issue is "not on our priority list," and a long way from coming to fruition.

Already, Fannie Mae and Freddie Mac have directed their servicers to stop the practice of leaving mortgage assignments in the name of MERS when filing foreclosure lawsuits. And MERS itself has proposed a rule change to require its members to file a mortgage assignment transfer from MERS to the name of the note holder prior to filing a foreclosure lawsuit.